Philips 2004 Annual Report Download - page 8

Dear shareholder,
2004 was a year of major progress for Philips. Driven by our focus
on operational performance and cost management, our financial
results showed considerable improvement, delivering a return well
in excess of our cost of capital. With the consistent execution of
our management agenda for 2004 we also took an important step
forward in implementing our strategy to transform Philips into a
truly market-driven healthcare, lifestyle and technology company.
And with the introduction of our new brand promise ‘Sense and
simplicity’ we are creating a unique, differentiated positioning that
will further enhance our value proposition to our customers.
Strong financial performance
Adjusted for the weakening US dollar, sales were up almost 9%
compared to 2003, mainly in Semiconductors, driven by a rebound
in the industry, and in Consumer Electronics. Going forward,
however, our focus on innovation is providing Philips with a basis
for stronger growth across all our divisions. Capitalizing on the
significant cost savings and the process improvements we have
made over the past few years, income from operations increased
to EUR 1,607 million, or 5.3% of sales, moving us closer to our
goal of a 7-10 % operating margin, to be realized within one to two
years from now. Income from operations includes a gain from the
initial public offering of NAVTEQ (EUR 635 million) as well as an
impairment charge for MedQuist (EUR 590 million) and the net
cost of settlement of litigation with Volumetrics (EUR 133 million).
7Philips Annual Report 2004
Message from the President
“With the introduction of
our new brand promise
‘Sense and simplicity’ we
are creating a unique,
differentiated positioning
that will further enhance
our value proposition to
our customers.”